I personally hate any book written this way. Dracula by Bram Stoker and Carrie by Stephen King are two examples of popular books written this way, but I hated them both.
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StrixVariaNov 25 '10 at 13:32

10 Answers
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Diary form is used when a deep immersion of reader is wanted. Yeah, we all want to immerse readers into our universes, but it comes with a price, and not a small one. With diary form you can reveal only one point of view: of character who keeps a diary.

So, I guess, this is the rule: You should use diary as a narrator, when you want to bring more realism, but ready to neglect different viewpoints on your story.

Flowers for Algernon, by Daniel Keyes. The quality of the writing changes throughout the story, indicating the increasing (and later, decreasing) intelligence of the writer/protagonist.
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Neil Fein♦Nov 25 '10 at 18:55

I agree with @Strix's comment on the question with one exception; Flowers for Algernon. Thanks for reminding me about that classic, @neilfein, definitely gotta reread that sometime soon.
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MaulrusNov 28 '10 at 2:52

"With diary form you can reveal only one point of view" - that's not true, there can be several diaries, several narrators. A case in point: B. Stoker - Dracula. Although it IS kind of weird when there are several diaries in the novel. And it also might be that the author is just lazy - it seems to me that writing fictional diary is easy (especially if one also writes personal diary) compared to writing from 1-st or 3-rd person perspective.
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Lukas StejskalJul 18 '11 at 14:25

I would investigate The Notebooks of Malte Laurids Brigg by Rainer Maria Rilke. It is a proto-Modernist text that deals with the interiority of the narrator, and his gradual retreat from the social sphere into the mental sphere.

In my experience, the diary form is a device used to foreground the unreliability of the narrator's perspective. It does not necessarily have to be used with unreliability in mind; however, it is a way to emphasize the inherent subjectivity in narrative perspective. Remember, though, that diary and epistolary devices serve different purposes: the diary speaks often to the self, or a fictional audience; the epistolary speaks to a specific, definite audience. Dracula is pre-dominantly epistolary, insofar as many passages are intended to relate information to particular individuals. As is the case with Shelley's Frankenstein. I very much hope that no one strikes Stoker's masterpiece from their Reading List, as it is a fantastic read.

As for appropriateness, that depends entirely on the author, and the tone they wish to achieve.

It tells the story of a man who wants to write a novel and decides to start a diary to rework it later into novel form. He ends up writing about his own life and his seeming lack of attention for what is happening around him.

That aspect is in the story too. Actually, the boundary between diary/novel/meta-diary/meta-novel is not always clear, but that is typical Moravia. For instance, one chapter he describes some events, next chapter he explains that he didn't reproduce the events truthfully in his diary and he rectifies. It's very interesting, but brainy. If you don't like psychological novels, never read Moravia.
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RaskolnikovNov 30 '10 at 10:55

You could also consider having a diary-form be only part of your novel. Lately I've read fiction that changes point of view from first to third person as the book moves forward. At first I found it a little disconcerting. But if the changes have their own rhythm to them, and they are somewhat predictable, then I think it can work well.

As neilfein pointed out, Flowers for Algernon. I think what makes it particularly effective is that the very viewpoint of the narrator is itself a major plot point, so the diary form is a logical choice.

"Dangerous Liaisons" is originally told through the letters that the various characters send to each other (mainly Valmont and The Marquise). This makes it possible to mix several points of view (as opposed to with single diary, as mentioned by Daniel Excinsky's answer), but it makes it also more difficult to read for some people. Not sure if it fits what you're looking for ("diary as a novel") but it sure fits the more general "epistolary novel" category that you may want to look into for more options and storytelling techniques.

When you feel like it. When you, for reasons even you don't fully understand feel like writing your story, or some part of it, in the form of a journal.

If that's how you feel, then you have no other option but to use the journal form. To use another form would be an act of self-betrayal. If you don't feel like it, then you must not it because in that case to doing so would be phony and pretentious.

More to the point, you're going to have to live with this thing until you finish it, so you'd best write it in the form you find most interesting, regardless of whether it's journal, third person omniscient, "close third," epistolary, ePistolary, tweets, or something you just made up.